Superannuation undergoes sustainable transformation

Pensions and superannuation funds are allowing investors to authentically consider the sustainability of their portfolios.

And crucially the huge inflow of money into responsible investment funds is driving transformation, as businesses recalibrate around more sustainable policies and processes in response to investor demands.

According to Mary Delahunty, head of impact at industry superfund HESTA, “We now associate sustainability with an understanding of whether or not a company and its business practices respond to a changing climate and whether they can help us to arrest that particular trend.”

By capitalising on both risks and opportunities, sustainability can be a driver of transformation for businesses of all sizes, says Delahunty.

“Businesses are transforming rapidly as a result of sustainability commitments. Businesses, both large and small, are understanding the risks to their ongoing practices that might be present in a changing climate,” she says.

Delahunty believes that the trends of capital inflow into responsible superfunds show that sustainability is a key consideration for a long term investment horizon.

“The trends in superannuation funds do mirror what consumers are understanding to be sustainable finance,” she said.

“We want to be able to participate in opportunities that are representative of a transition to the economy. And that can come down to sustainable finance opportunities and investments, whether that's at a company level or whether you're seeing them at an aggregated opportunity set as well."

While responsible investment is a growing area of practice, Delahunty says that the learning process of operationalising this practice is ongoing, with the knock-on effects still being discovered.

She believes that the large scale transformation that has occurred for businesses over the past 18 months has shed a light on the impact of business on society.

“This pandemic has allowed a conversation about the S in ESG, to be had in a more informed way. We're able to assess which social characteristics are required of either a business or portfolio to deliver returns over the long term."

Delahunty gives the example of the higher COVID transmission risk associated with insecure work.

“One of the areas where we are asked as nations and organisations to focus and I think what the pandemic has shown is that unless everyone has access to decent work, no one is safe.”